Q3 2021 Mullen Group Ltd Earnings Call

Sub sector of the economy.

So for example.

Our largest segment less than truckload L. T L. As it is commonly referred to it's the bellwether when it comes to consumer activity in Canada consumer demand remained strong throughout the quarter.

However, we started to witness disruptions in the supply chain impacting everything from the availability of many goods to productivity levels. In other words demand continued to be strong, but overall freight volumes appear to have peaked at least in the short term due to supply chain issues in fact, I'm beginning to wonder if these supply chain problems.

May become the achilles' heel of future growth in the economy, but more on this later.

Now turning to logistics and logistics.

Logistics and warehousing segment, which includes full load trucking services. It continued to improve but we have not hit our full stride as of yet and by this I mean, we have not seen the pricing increases that are both required an inevitable as capacity here in Canada Titans.

But it is coming.

As demand returns, especially as capital goods start moving again, we're telling all customers. We can service your logistics needs, but you need to pay our price. This may end up being the new trend the new normal, especially given the driver shortage facing the industry.

Because without access to new professional drivers there is precious little the industry can do to drive growth in other words limited top line growth, but improving margins due to pricing increases by the way. This has already occurred in the United States and Canada. We have lagged on this market change, but as I have suggested I am of the view that we are in the early days of improved pricing.

I can tell you. This our business units have heard me loud and clear prices must rise.

Specialized industrial services segment is closely correlated to capital investment in Canada, including construction major project development of oil and gas natural drilling and pipeline construction during the quarter. This segment continued to be the most impacted by Covid restrictions project delays base camp quarantine protocols protocols didn't just curtail revenues.

And also led to increased costs.

A challenging period for most of our specialized and industrial business and services business units.

Is all I can say the most positive takeaway during the quarter was the continued improvement in oil and natural gas drilling activity. It certainly appears that this part of the economy will only improve as commodities prices hit multiyear highs driven of course by improving demand fundamentals accompanied by tight supply.

I think ultimately this is going to be good for our business.

Our newest segments U S and international logistics is off to a very strong start recall that this segment is focused on three PL.

Is basically a non asset based business, except for our investment in technology as such gross margins on stated revenue are typically lower and this is why we look at operating performance on a net revenue basis, because it shows how well the senior team is managing the spread the difference between gross revenues less cost.

So moving the goods via third parties.

On both metrics the team holistic LLC did a great job, beating our initial expectations in terms of total sales and net margin.

The U S freight market is.

And I'm not stretching this its on fire its driven by a strong economic fundamentals and a tight supply chain.

Most exciting encouraging aspect of this investment is we're still in the early innings of transitioning the business from the previous ownership group Quad graphics into a standalone business unit within our organization. This was not an easy acquisition given that we needed to carve out the business from Quad we.

We need to establish a new U S based operating entity, which by the way we've rebranded as holistic LLC and ensure continuity of operations kudos to you all at holistic well done team and from my perspective, there's nothing but upside a great business model operating in a big market with an experienced and motivated senior management team.

Have an excellent technology platform that will only get better as we invest to ensure a holistic maintains its industry leading capabilities.

Now the next discussion point and while I don't like referring to Colgate is a highlight there is a certain reality that we must deal with it continues to cause havoc both from a health perspective, but now from a supply chain perspective disruptions.

Disruptions slowdowns delays plant closures have all contributed to reduced productivity.

That implies increased costs and more generally speaking I believe its leading to inflationary pressures, which we all know has its own set of consequences. So we are watching this very very carefully.

And speaking of inflationary pressures. This is the last highlight I will comment on before turning the call over to Carson Urlacher.

As I said who's subbing in for <unk> clock. This morning, rising costs lack of productivity and now increasing wages driven by a labor crunch across North America, there appears to be a shortage of workers.

And in our case, we know it is difficult to recruit and hire truck drivers dock workers mechanics, and other frontline workers. So the question. We're all trying to determine is where did they go.

I'm not exactly sure, but this I do know for sure labor shortage. It's.

Widespread and wages are going up.

But here's the rub.

Along with higher wages and higher costs more generally speaking comes higher pricing.

This all sounds inflationary to me whether you believe all of this as transitory as up to your interpretation of the current trends, but from my perspective, admittedly I don't know for sure. This I can say with confidence unless we get more Canadians back working rising wages will continue as long as demand remains at current levels. There are no quick.

Or easy fixes to the driver shortages or more generally speaking to the labor shortage.

So overall, let me summarize the quarter.

This way revenues at record highs.

And we had a solid performance.

Operating performance and that's driven by a couple of factors first is the new acquisition.

They just take time to get to the proper level profitability levels. We expect second in our Q3 2020 performance.

Which was over the top good for two reasons. The first contributing factor was due to pipeline construction activity here in Canada, and the strong performance of our Premier pipeline group. This year pipeline construction has been disruptive time and time again the projects remain but they are not on schedule and they are not as profitable. The second factor of course was skus last year.

Government subsidies were $10 million this year virtually zero in other words when you look at this quarters results you will see we successfully replaced both the loss of the profitable pipeline construction business and Qs.

More importantly, what we have today as a larger more stable and sustainable business in this I feel really good about Carson.

I am going to turn it over to you to provide a more in depth review of the financial performance for Q2 2021 Europe Carson.

Perfect. Thank you Murray and welcome everyone.

I'll get a little more granular however, our interim report contains the details that fully explains our financial performance.

I'll provide you with some of the financial highlights for the third quarter of 2021.

For the quarter, we generated record revenue as compared to any previously quarter period.

Greater proportion of our revenue is now directly correlated to consumer spending.

Year over year revenue was up $141 6 million or almost 50%.

$432 5 million and as Murray alluded to earlier. This record revenue was mainly achieved through acquisition acquisitions, which added incremental revenue of $136 5 million. We also experienced modest same store sales growth within our <unk> and logistics and warehousing segments, which was somewhat offset by a decline in same store sales.

In our specialized <unk> industrial services segment.

<unk> fuel surcharge same store sales were up about $5 1 million and was due to the net effect of an $8 $5 million increase in the <unk> segment of $7 $4 million increase in the logistics and warehousing segment and these increases in same store sales were somewhat offset by a $10 million decline in the specialized <unk> industrial services.

Segment.

Our fuel surcharge revenue rose year over year, because of higher diesel fuel prices total fuel surcharge revenue, including amounts from acquisitions was $32 9 million, an increase of $18 $18 million as compared to $14 9 million in 2020.

And it's important to note that no margin is made on fuel surcharge revenue.

This increase is actually detrimental to our overall margin, but more on this later.

Now going into more granular on our segment revenue first starting with our largest segment not being the RTL segment grew by over.

$56 4 million to $169 1 million as compared to $112 7 million in 2020 Act.

Acquisitions accounted for $47 9 million or <unk>, 85% of this rise in revenue the remaining increase of $8 5 million was due to increases at all business units due to the continued strength in consumer spending providing a steady flow of freight for our <unk> group of companies.

On a same store sales basis, adjusting for acquisitions and fuel surcharge. This segment experienced a three 7% increase in revenue, which was largely due to gains in guard won.

Revenue in the logistics and warehousing segment rose by $35 7 million to $121 9 million compared to $86 million in 2020 due to the $28 3 million of incremental revenue from acquisitions as well as a $2 8 million increase in fuel surcharge revenue same store sales adjusted for acquisitions and <unk>.

Fuel surcharge fluctuations were up five 6% during the quarter. The freight market is improving as overall economic activity continued to improve and drive greater demand for freight services.

Revenue in the specialized <unk> industrial services segment declined by $6 7 million to $85 7 million as compared to $92 4 million in 2020, primarily due to an $11 million decrease at premium pipeline hauling which came off a stellar performance in the third quarter of 2020.

We also experienced a $5 $8 million decrease in revenue at Smith contractors as Murray.

I mentioned COVID-19 restrictions and other temporary delays resulted in a significant decline in major pipeline construction activity in BC as well as civil construction work in Manitoba.

Decreases were partially offset by greater drilling related activity in western Canada, as higher crude oil and natural gas prices resulted in an $8 $2 million increase in revenue from our drilling related services group of companies.

This segment also generated $3 3 million of incremental revenue from acquisitions.

Revenue generated by our new non asset based U S and international logistics segment were strong exceeding our expectations by adding $57 million of revenue in the quarter.

Our team at holistic continues to grow in the three three PL space by adding new regional station agents to our silver expressed technology platform as the U S market continues to benefit from strong economic fundamentals, coupled with a tight supply chain.

Now in terms of profitability.

Operating income before depreciation and amortization, commonly referred to as EBITDA decreased by <unk> 7 million to $64 5 million as compared to $65 2 million in 2020.

This however is a misleading indicator of our underlying results from operations. Given we included $10 $3 million of queues in Q3 of 2020 as compared to only 100000 accused in 2021.

We measure our success by measuring the sustainable underlying business performance and we adjust our senior management and executive profit share performance plan to exclude any amounts received from Qs.

That said, we included within our MD&A and non-GAAP measure this quarter, we called adjusted <unk>.

The definition and reconciliation reconciliation of adjusted Oi BDA tool EBITDA can be found within our reconciliation of non-GAAP terms within our interim report, but essentially its all EBITDA excluding queues.

Our adjusted EBITDA was $64 4 million for the quarter, an increase of $9 5 million compared to $54 9 million in 2020.

The $9 $5 million increase in adjusted OIBDA was due to acquisitions, which generated $15 7 million of incremental adjusted EBITDA.

This however was partially offset by lower profitability at <unk> pipeline and smooth.

Let's take a look at adjusted OIBDA by segment.

And the <unk> segment, adjusted OIBDA increased by $6 2 million to $26 9 million as compared to $20 7 million in 2020.

This increase was due to $6 8 million of incremental adjusted EBITDA from acquisitions, which was somewhat offset by higher purchased transportation costs.

As a percentage of revenue adjusted operating margin decreased to 15, 9% as compared to 18, 4% in 2020 due to lower margin generated by our recent acquisitions currently our recent acquisitions. In this segment are generating margins below the segment average, but for now for those that have followed us for awhile know that our.

<unk> of improving margins.

Is intact in fact that is our mission statement, we acquire companies and strive to improve their performance both in terms of profitability.

In terms of safety and other ESG metrics.

Adjusted OIBDA in the logistics and warehousing segment increased by $7 3 million to $22 7 million as compared to $15 million in 2020.

$5 7 million of this increase was due to incremental EBITDA from acquisitions with the remaining increase being due to the improved performance by most business units in this segment.

Adjusted operating margin increased to 18, 6% as compared to 17, 9% in 2020 as some rate started to improve and our cost control initiatives initiatives remain intact.

Adjusted <unk> in the specialized <unk> industrial services segment decreased by $5 6 million to $15 6 million compared to $21 2 million.

$5 $6 million decrease is attributable to a $6 $5 million decrease in those business units, providing specialized services a $1 2 million decrease in those business units involved in the transportation of fluids and servicing of wells, which was offset by a $2 $1 million increase from those business units type drilling related activity.

So the largest decline in this segment came from specialized services group, which was almost entirely due to the $5 $3 million decline in adjusted EBITDA by pre made pipeline.

Again, <unk> performance was outstanding in 2020 and could not be repeated as a result, adjusted operating margin decreased by four 7% to 18, 2% as compared to 22, 9% in 2020 due to the change in revenue mix.

So if we strictly look at margin now on a consolidated basis adjusted OIBDA as a percentage of revenue was down 4%.

To 14, 9% compared to 18, 9% in 2020. This 4% reduction is explained by the following factors first the shift in revenue mix that I, just mentioned between premade pipeline and smooth being down $17 million in revenue and $6 million of adjusted or IBD Hi.

High margin project work with respect to pipeline activity in the third quarter of 2020 was exceptional whereas this year's projects have been met with setbacks from COVID-19 restrictions and other project delays.

Second we expect lower margins to be generated from our new $50 million acquisition of holistic in our non asset based U S. Industrial logistics segment, which added $57 million of new revenue this quarter.

Gross margin was $5 3 million or nine 3% of revenue and adjusted OIBDA was $2 9 million.

Or five 1% of total revenue.

This margin alone accounted for one five points of the 4% lower consolidated adjusted operating margin as this segment's results consolidated adjusted margin would've been 16, 4% as compared to 14, 9%.

From a strictly cash per sector perspective, adjusted <unk> in this segment is virtually the same as EBIT.

Third we generated $32 9 million of fuel surcharge revenue and 18 and $18.

$18 million increase from the $14 9 million generated in 2020 fuel.

Fuel surcharge is detrimental to our operating margin since it's effectively a flow through to compensate for rising diesel fuel prices some of our peers exclude fuel surcharge when they report margins, whereas we do not if we were to exclude the $32 $9 million of fuel surcharge revenue in the third quarter of 2021, our adjusted operating margins would have been.

<unk> improved by one 2% to 16, 1% from 14, 9% and lastly, we generated $47 $9 million of incremental revenue from acquisitions in our <unk> segment that achieved an adjusted operating margin of 14, 2%, which is one 7% below the segment average.

This provides us with the opportunity that Murray spoke to earlier, which was for what we purchase for us to do what we do best and that's acquired companies and improve their performance.

Now just a quick word on <unk> as you know we recorded virtually no Qs this quarter as we are currently in the process of evaluating the legislative framework surrounding the payback provisions for public companies, we will complete our evaluation in the fourth quarter and we will know whether we will be applying for Qs.

Or not.

Looking at some other notable items, we continue to generate cash in excess of our operating needs as cash net cash from operating activities for the period was $37 3 million. Although this is a decrease of $10 million from the prior year. The decrease is mainly due to.

Growth and business expansion from our acquisitions as we were required to finance our working capital requirements.

We now have a total of $250 million of bank credit facilities available to us.

To which we had $85 million drawn at the end of the quarter, thus, leaving us with over $160 million of room available.

Our basic earnings per share was down to 18 cents as compared to 2007.

On a reduced share count as we bought back two 3 million shares in 2021.

The main reason for the decrease in earnings per share. This quarter was due to the $4 $6 million increase in amortization of intangible assets.

Which is a noncash item.

Virtually all of our intangibles consist of customer relationships and competence and non competition agreements acquired on acquisitions and at Mullen, our intangible assets are amortized over a five year period from the date of acquisition, which is pretty aggressive and may not be comparable to other reporting issuers.

Lastly, a quick word on ESG for those that know us. It's no secret that we have always had an unwavering commitment to safety and our people our year to date lost time claims ratio in 2021 is 0.81, which is only slightly higher than the 0.79 for the same period in 2020 in fact, our total recordable injury rate was <unk>.

Down year over year to 257 from $2 79 in 2020, our safety results continue to be best in class, which is a testament to not only our core business, but also our new acquisitions, knowing that we have similar views when it comes to our safety culture.

So with that Murray I will pass the conference back to you.

Thanks Carson.

Just a great summary, I appreciate that so to all with the third quarter now completed.

I'll spend the next few minutes outlining our look for the balance of 'twenty, one and in just a few short weeks, we will post our 2022 business plan and operating budget, which.

Each time, we will be better prepared to talk about what we expect in 2022.

As for the fourth quarter, there are a lot of issues to consider with a lot of moving parts. Nevertheless on balance.

A pretty constructive view for the majority of our business units and for the markets. We serve which leads me to believe we will finish 'twenty one on a positive note and generate some good results and let me explain why I say this and I'll start with the obvious acquisitions will drive topline growth and earlier I spoke of six acquisitions completed this year with five.

Were completed in the second quarter alone.

We just completed one and finalized one on October one.

So you've heard our discussion and rationale for the earlier acquisitions, which are substantive and a game changer for our business as such there is no need for me to expand further how will however provide some details on the transaction. We recently completed its not large they're generating around $15 million annually annually, which is.

Which is why we did not press release, it's a small acquisition but.

But it does foretell, what we're thinking strategically direct <unk> group of companies.

As the leading provider of career in small package deliveries in the Calgary market. They have an excellent reputation providing best in class service.

They have the critical mass that's required and the Korea business to be profitable. They utilize a fleet of independent contractors and minimize capital required and they have a proprietary technology to manage the business. It's a platform I believe we can use to enter new metropolitan markets. So.

This transaction not just for the good company, we acquired but also because it has the potential to be scalable.

Plus I see how.

There is potential for us to leverage the e-commerce business that we have.

And expand our ambient delivery footprint.

The reason being is that the courier business is better suited to capitalize on these opportunities than our current LTM business for one simple reason small package.

It requires small delivery units not trucks and once again direct ITE has the critical mass in the small package business to make this happen profitably.

Now in addition to acquisitions.

From the evidence I see the economy remains on solid footing, which is very supportive to the markets. We serve I do not expect however.

However.

To see a lot of internal growth and that's for two fundamental reasons. The first is the supply chain you have heard me speak about that earlier.

There is far too much inventory that stuck somewhere in the system, that's limiting consumer choice or factory productivity.

Retailers cannot sell what they can on axis and factories cannot build without every component delivered on time.

There are quite simply too many bottlenecks for the system to be productive.

The second and perhaps the more long lasting issue as the labor shortage, yes, there are a lot of people working.

But will the next qualified where we will go next qualified workers come from.

And everyone in business knows that without additional labor joining the workforce. It is difficult to see how a company can grow.

And Furthermore, when labor markets are as tight as they currently are.

<unk>.

That wage pressure.

We will not arise.

So in summary from a top line revenue perspective, we should deliver some really nice results in Q4 consumer spending remains strong, but probably not growing. So this is a solid indicator for what to expect on our <unk> segment logistics and warehousing, along with trucking a pure pretty steady with some early indications.

That capital investment is finally, starting to accelerate here in Canada, which would be very positive for our <unk> businesses.

And then there is a higher crude oil and natural gas prices, one would expect the drilling activity in investment by the producers when increase given the cash flow. They are generating there is over a dark side to rising energy prices higher fuel costs come to mind inflationary pressures are building as such we are mindful of these impacts.

And the one negative I see again this quarter as the decline in year over year pipeline activity.

The pipeline projects are still bottlenecks with just issue after issue.

And recall once again in 2020, our premium pipeline group had an outstanding year capitalizing on just an active pipeline.

Project Wise this year the drama on these projects is nearly laughable. If it were not so sad delays of every sort you could think of have hampered activity and productivity and to our shareholders. I would note. This changes in the fourth quarter. So revenues associated with pipeline construction would be down year over year, that's negative jaws.

Our specialized <unk> industrial services segment again in Q4.

However, we do expect drilling activity to be up somewhat to mitigate part of that.

And lastly, a comment on our U S and industrial logistics segment.

Louis reporting segment, the freight market in the U S. So as I suggested earlier is on fire and our logistic holistic team is doing a great job capturing market share, they're managing the demand flow and at the same time working through the transition of the old Quad Express business into elastic.

Taken a total team effort and a lot of support from people at the Quad graphics in the previous owner I want to thank them tremendously.

For everything they've done to help with this transition.

It has gone just about as seamless as possible, particularly to our customers into our people.

We will continue to make progress on the transition plan in the fourth quarter.

And with business remaining strong.

I'd expect another really solid quarter performance from our U S team.

A couple of comments on profitability before I close out today's formal presentation.

Profitability as it's measured today could be measured as EBITDA.

Roy BDA.

It should be similar to Q3 results given the top line growth I spoke about.

Which is.

It just hasnt grown our revenues.

With the topline growth to record highs and really has fundamentally altered the structure of our business.

Acquisitions completed this year are generally on the asset light side.

Meaning.

We really don't have a lot of capex required to maintain the business and.

And Thats a good thing, but less capital employed also means lower will be dollar numbers, but not operating income folks I wanted to make this distinction clear because while our Ob Dol will grow the margin will fall as we include.

More light asset.

Business units into a network of wholly owned subsidiaries and this by the way is all by design. In addition, we have a couple of nonrecurring items that occurred in Q4 2020 that will not be repeated this year queues and reduced pipeline activity in the province of BC I guess, the best way for me to summarize what to expect is that we have.

To replace these nonrecurring items with sustainable long term profitable business.

Sure we feel good about that now earlier you heard that we've increased our banking facilities by about $100 million and thats, providing ample liquidity in the event we <unk>.

<unk> additional acquisition targets.

But but to be blunt I'm not sure we'll need these additional lines of credit because I do not like the valuations today.

But we're also ready if the right opportunity presents itself. So thank you again for joining us today and let's now open up the phone lines for that always interesting and informative Q&A session, operator, I'll turn it over to you.

Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear atone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any teeth to withdraw your question. Please press Star then two.

Our first question comes from Michael Robertson of National Bank Financial. Please go ahead.

Hey, good morning, everyone. Thanks for taking my questions and nice job <unk> been aiming for Stephane wishing him a speedy recovery.

I wanted to maybe start with something you sort of touched on that that the end of your comments there Murray.

Looking at the inaugural quarterly results for the U S and international Logistics segment.

Revenue was above expectations, given the strength of the U S freight market.

<unk> of <unk>.

Regional station agents, but looking at the 2020 revenue highlighted for that business at the time of the acquisition it looks like a really strong quarter.

So I'm just wondering how lumpy you would expect this business to be from quarter to quarter or whether there is some seasonality.

Ray here.

I think typically you kind of have three buying seasons in the freight business you have.

Because a lot of freight is consumer driven you have.

The holiday season, which is coming up so the fourth quarter should be pretty strong.

First quarter would probably be your softest and then youll get ready for this for the summer season, and then you have the back to school so.

If you have a softer quarter, it's probably Q1.

Uh huh.

But three pretty strong ones in Q1, there'll probably be a little bit of consumer hangover from all the buying in at Christmas and whatever Thats typically what you see.

And I wouldn't be surprised that happens again this year that might give.

A little bit of a cover for.

The supply chain bottlenecks that we've got to maybe catch up a little bit in <unk>.

Q1.

I wouldn't be surprised but.

I would suspect.

Q4 will be.

Similar to Q3, maybe maybe stronger the team has indicated that.

The market is still on still doing extremely robust activity right now, but Q1 might be a little bit softer but.

That's just traditional <unk>.

<unk> strong guidance once off typically.

That's helpful color Murray and yes.

Good to hear regarding Q4 as well.

Just sort of switching gears here do you.

Do you see the M&A landscape shifting at all right now given the change in the government subsidy programs that you referred to.

Yeah, that's you know what.

I think if you if you want one reason why the Canadian marketplace has not had the same pricing leverages as the U S. Its simply called Qs.

Everybody in Canada got money and that protected every business unit, so and we got money to full disclosure our company qualified for a lot of accused but.

Yeah.

That's the system, we were prepared without Qs and we would've probably if there was no cues, we would probably picked up some really good companies that are really good discount price, but that's not the case. So everybody survived, but Qs is now running out now they got to survive without queues and remember accuser bottomline numbers does not.

Topline numbers.

No.

Everybody was kind of protected now you've got rising costs and you've got this.

I think it's only a matter of time until that catches up in this marketplace.

When we look at all the business units Michael.

But we look at acquiring I can tell you right now we discount Qs, we do not pay for Qs.

We take a look and make sure the company can recover from that and if we are convinced of it then we don't bite on those targets.

But I would suspect.

I would suspect some problems coming up in 2022 companies don't.

If they don't adjust their pricing.

They will be in a lot of trouble.

That's helpful color as well.

Maybe last one for me here is it is it too early to ask about Capex that patients are looking out to 2022 I may have to wait a few weeks for your business plan, but I know some of the planned expenditures you had this year were disrupted by supply chain challenges. So wondering if you see that sort of spilling over into next year and what that might entail.

Well I can tell you can put whatever you want and in Capex. The bottom line is you can't get it.

So.

And everybody is on allocation right now so I would suspect that in 2022.

It'll be difficult to.

Really to ramp up Capex, because you just can't get the product.

But another comment on Capex on Capex for us we've grown the business substantially but growing by 50%, but I don't think our capex will grow by 50% because a lot of the business, we acquired our non asset based companies.

There are asset light so.

For example, our business in the United States holistic.

We all know trucks, we don't know trailers, we own our own facilities.

We only invest in technology. So that's a pure <unk> very very asset light. So what you get and it won't be daus, what you get me an operating income really so.

We did by design, we went more asset light.

Because we just saw some problems in the market on the asset side base.

Sure.

We.

We will invest in asset businesses, but I want to return and if you invest in an asset based business you better have a 5% margin built in for the asset.

Because that is depreciation.

So that's what you need so.

If I go asset light.

15% tomorrow might be the same as 18 or 19% of yesterday, because we've changed we just fundamentally changed the structure of our business.

Understood.

Thanks for taking my questions I will turn it back.

Thank you very much I appreciate your comments.

Our next question comes from Walter <unk> of RBC capital markets. Please go ahead.

Thanks very much.

Thanks for taking my question.

Alright, good we're doing good thank you excellent.

So maybe starting on margins in the input costs and labor inflation that and difficulty getting drivers and wage inflation and so on.

But do you think given the pace of your contracts customer discussions are you able to keep ahead of that in your pricing.

Not so much for this year, but for next year in other words do you think you can protect margin with pricing to offset the cost pressures for next year.

Or is there a disconnect or a lag there that is not going to be not going to allow you to to grow margin because of that dynamic.

That's the one that everybody is struggling with I'll give you I'll give you a couple of comp.

Comments on that Walter so, let's let's start with.

With the most obvious price increase that's fuel because it's it's.

Representative on fuel surcharge.

That shows up as revenue, but you make no margin on on on fuel surcharge in fact, you're actually behind as fuel prices go up because you always adjust fuel surcharge 45 days or 60 days after the price increase.

Not on a daily basis, and you have to build that into your rate structure, so as fuel prices keep rising.

Youre live.

Little bit behind on that it's when the fuel prices level off that youll be able to catch up and get normalize. So we're behind the curve on.

Fuel prices now lets go let me go to the other some of the other capital costs coming in that's more long term I can just tell you right now trucks trailers everything we do not only is it take longer to get but it's more money. So we have to build that into our cost structure that really hasnt hit.

It's quite yet what has hit US Walter is parts parts and labor.

And so we probably lost that we were behind the curve a little bit.

In the third quarter.

There's a little bit of noise in there because so much was on our pipeline side, but I would say to you I suspect we're behind a little bit on that.

Just because.

Parts pressure is quite significant the labor.

Issues. It's just it's the newest one Walter and all of our business units.

I've heard us loud and clear we've had our calls.

You can give your wage increases to your to your employees.

And they won't be 2%, there's going to be a couple of more net.

But you've got to recover from the customers. So.

Our plan is to stay at least equal.

On the labor front.

<unk>.

Then, let's see what happens when these carriers that have been getting Qs I think theyre going to have to raise the prices. The marketplace has been more competitive in Canada substantially more competitive than in the United States, Let's see what happens in 2022. This cost curve is catching up to everybody.

In my mind, we're going to at least stay even I can tell you that.

Okay, that's great moving over to industrial services, obviously with the downturn in that sector. Previously you saw your revenue follow suit as capital spending.

Dried up there now with commodity prices coming down how much are coming back up how much of a line of sight do you have on those projects in other words are we likely to see and I know you gave guidance already for fourth quarter that it is going to be probably the same so presumably we're probably going to see another quarter of similar contribution from.

Real services, but do you have line of sight for next year that on the capital spending front that we might get a step function increase in your and your revenue in that segment as as capital projects start to pick up amid higher commodity prices.

I don't think so.

I am concerned because theres no labor.

And.

And theres not a lot of capital going into that.

Into the sector, so I suspect that there'll be it'll be better next year.

But I don't see a substantial increase because theres just no labor to do the work.

What I can tell you is is that I am not satisfied with the returns.

We're going with pricing.

No.

I expect our margin to go up but I don't think our revenues will go up a whole bunch.

But we're raising prices that's all there is to.

If you don't want to pay the price that and give your business to somebody else. So im okay with it I can't get the people anyhow, So don't worry about it.

But if you want our people.

And you want our service youre going to pay more.

And Thats what were telling me all companies Youre charging the consumer more.

You are paying more to us.

But I don't know at least I don't know if all the money. They are making is going to be put back into the drill bit because of ESG because of.

There's just not there's not support from shareholders or from government or policy for the industry to go and invest to grow.

So it looks to me like it's going to be pretty difficult to grow supply.

Unless you go drill.

It doesn't just come out of thin air.

And as an industry as a service provider you make money.

Not when the oil companies make money, but when they spend money.

And I keep hearing more and more they're going to pay dividends buyback stock.

<unk> not.

<unk> put it into investing into.

Adding supplies I think that's I don't see that yet.

We won't be we won't be putting any capital into that business.

But I can tell you, we're going to charge more money and.

Most of those customers don't want to pay it won't give somebody else a called don't call us.

I don't need to take your call.

That makes sense.

Our final question from me Murray.

You've been following no doubt the drama at Canadian National and you've heard that.

They're under pressure to perhaps divest of some of their non rail assets.

Would those fit into your into your strategy are they consistent with the type of growth that you want to see assuming it comes at the right price or are these businesses completely.

What you're interested in terms of your.

You are looking to drive growth.

No I mean, the and what's your I think what Youre talking about is the.

Let's call that trans ex assets, the H&R assets a lot of the business that.

CN acquired there was not the trucking per se they wanted to protect.

The intermodal business, and which is why they bought transits and H&R.

That intermodal business is a key part of our future because we think.

That.

Is it going to be really difficult to get long haul truck drivers, it's going to be.

Really difficult to get trucks that we will not need diesel to go long haul.

We like the intermodal business, we think thats the way freight is going to move in.

CN the sides will be we'll look at that just like some others will.

That's why we bought apps apps is a big intermodal business. Our leasing group is very big in the intermodal business.

And we continue to see that as the way that freight will move across Canada East West as the intermodal so we'd take a look at it.

And we are really strong.

Relations with the CN group, so we'll engage with them when their time is right, but as you said they've got they are working through some issues.

But.

We do a lot of intermodal work with them right now so.

We will talk with them.

For sure.

Thanks for the color as always very very helpful. Thank you.

Okay. Thanks Walter.

Our next question comes from connect Gupta of Scotiabank. Please go ahead.

Good morning, and thanks, everyone.

Sure.

Oh my.

Well, yes.

I wanted to ask maybe the first question I wanted to ask on the cost inflation.

Yes.

Kind of a detriment I think on the quarter in terms of margin performance, even though obviously our revenue performance is phenomenal so.

Wanted to ask you on the purchase transportation side so.

Purchase transportation cost.

Is pretty heavy in LTE out segment.

The other segment.

What's up for more than I think 100%, maybe 140% or so.

How much of that was driven by one time purchase transportation due to lack of quality subcontractors. So what is this.

Driven by acquisitions increased by those guys.

Yeah, a lot of it's driven by acquisitions.

Or are the newest acquisition of apps they use a lot of purchase transportation.

They're the asset light business model that I talked about.

And you use third parties to make.

Make the investment in the in the truck and sometimes the.

The trailer so apps is really.

They're a hybrid <unk> provider because they.

They have some of their own delivery, but basically they move a lot of freight by.

With third parties.

And.

The market started to tighten in.

<unk>.

In the third quarter so.

Price of transfer third party started to go up.

And.

We'll have to make sure that we cover that in our pricing those are things that everybody is looking at as we do our 2022 and 2022 budgets.

But the majority of it was.

It came from associated with our new acquisitions Carson I think I got that right did I know so Parsons Lynn.

Since my expert on this.

Yeah, you hit that one spot on Murray, Okay, Yeah, Oh jeez, Okay I knew the numbers that's good so mostly.

Mostly it was because of the new acquisitions, we did and because their asset light business models.

Meaning I don't have a lot of capex with these businesses so.

Which is precisely why we've invested in them.

Our thesis right now is correct is that we want to own the customer not the not the answer.

Makes sense makes sense.

These costs going up how quickly can you pass on these costs.

To our customers on that you pointed out at.

At the logistics <unk> warehousing segment for example.

Prices have not gone up yet to the extent that you like.

What's keeping pricing or rates to go up.

Modern subsidiaries.

Well I would tell you prices are going to go up.

No.

They have.

<unk> been a bit of lag in the third quarter, but not significantly.

What we see happening right now as the market is getting tighter and tighter.

And.

And the biggest thing Thats going up now is labor.

And.

And there is other than pricing pressures going up so we will be we will be at least with the curve as I said, all our business units.

Sure.

And you got to remember.

And this is to all the listeners is that we have been.

10 years of really not having a lot of pricing leverage in the market. So we've been aware that its coming and customers would have always been one 2%. It's not one 2% now it's five to 10.

And those are difficult discussions to have with everybody knows it that prices are going up throughout the whole supply chain.

So.

I think it's five to 10 now is the new norm, but boy, that's a big jump from a couple of percent, but that's the new world that we're living in and we're.

We're just telling people you're paying or don't call us.

Alright, and then do you have.

That then.

Periods when you renew your pricing.

Typically Q4 Q1 timeframe.

Yes.

We're all over the map on that because we're so diversified REIT, we got 40 different business units, there's not one set time of year, but typically.

For most we start setting our strategy in <unk>.

In October as we do budgets.

So we.

We will be looking at.

The wages and benefits for next year of this at the time, we do our strategy and then we do the strategy on the pricing.

For our customers at the same time so.

This market is very very fluid at the moment.

I'm I'm struck by how in certain segments that just happens like overnight.

In the shipping industry I can tell you right now the railways are moving prices like crazy.

They are not being kind to anybody that is in there or a big subcontractor.

When you see.

Our contract expense go up well, that's because we're using the rails.

There are big subcontractor because.

We do a lot of intermodal and those prices are going up which.

Which implies.

We got to pass onto our customers.

Yes.

So I'm, telling everybody I'm, telling of all our business units.

None of our business.

Units are going to take a take this on the chin for too long because everybody is paid on profit sharing their business unit.

So they're not there.

They're going to make sure we get.

Were kept whole at least tau.

Alright.

And they have already been made.

You've heard from me and they've heard from me.

And then quickly on the quad are holistic and great set of results in the first quarter. So congrats on that.

I'm just wondering I mean, I think to an earlier question.

These guys were doing 135 U S revenue last year.

Now if you annualize their Q3, but China on the Q1 is seasonally softer, but still like if you analyzed 57, you've got the legacy 35% kind of growth rate this year.

Is it is it growing at a significant double digit rate you're paying in the next couple of years OIBDA growth kind of got us up and down to single digit yes.

That's going to be the.

<unk>.

That's going to be the issue. We've got we're going to take a look at I would be extremely surprised if the market can continue to grow at the same robust pace that we've seen this year and I'm talking about the whole trucking industry and everything else.

Trucking logistics.

Warehousing everything I can't see the same type of growth rate next year.

I would tell you, though that I really like the business model. These folks out and we would hope that we can.

Beat the overall trend because we've got an excellent team and a great business model. So.

We will be in the 35% range going into next year not probably not.

But bill.

I wouldn't be surprised to see them in double digit.

This team continues to Amaze me.

I'll tell you that's been a.

We've had no negatives out of that acquisition.

That's great and then last one for me Abaco died or premium pipelines.

I think it's been a few quarters of decline and given the delays right now.

<unk> it.

Seems like more like a not a lost opportunity more seems like delayed opportunity. So whatever you are pushing out from this year is going to probably 2022 and maybe some part of 2023.

Is that correct and secondly, when do we start lapping the PMA easy comps.

Well I think what youre going to.

A really strong year last year that was.

A good chunk of that was kind of.

Just the special moment and they just they just did a fantastic job last year.

We expected it to come down this year and we highlighted that but we didn't expect every project to be.

Have the delays they have and it's pushed it out here correct into 'twenty three 'twenty four even know these projects have just been delayed so much.

I think the problem I have is a profitability is not going to be as high because the delays don't allow you to.

Make a lot more profit because youre just less productive. So the projects are not going away, but I don't think there'll be as productive and product.

Profitable as we were in.

In 'twenty, but let me just make a comment on that.

That's the power of our diversified business model when the rest of the world was struggling.

We have this wonderful business unit, just a sip for US one of our business units.

And.

That gave us a great.

I'll put it as last year.

When the others were struggling now they are coming down and now we've got the consumer's strong. So that's the power of our diversified business model and I've got to tell you.

Make no apologies for it.

And the pipeline side when Theres a pipeline project to go.

That team over there led by Paul Schultz and his team.

They are the industry leader they'll do fantastic what you need to have in Canada is Canada do you want more pipelines to move the product.

Yes or no.

I doubt if it is going to be crude oil pipelines.

But.

It might be natural gas pipelines, because there is a huge shortage of natural gas in the world.

Is canada going to provide that some of that.

Or not that's up for Canadians to debate.

Perfect.

Thanks, I appreciate the time as always and speedy recovery for them. Thanks.

Thanks, Conor I appreciate that.

Our next question comes from David Ocampo of <unk> Securities. Please go ahead.

Hey, David Murray, how has it gone great.

Great. Thanks, I just had I just had a quick one for you on the package and Courier business that you acquired and you mentioned that you wanted to expand that to other regions.

Cross Canada.

You're going to be able to do that all organically or are you going to have to step in and make other acquisitions as you enter new markets.

Yeah.

That's what we're debating with them with the team that we got over there. The two previous owners have stayed on.

I mean, there are keys to this business part of it is going to be organic.

That we've got going on for example, our <unk> group is a very is it.

Good part of their group is.

Their business is in the career business in Winnipeg in Northern Manitoba, Northern Ontario, They have a really good network.

But it'll be I think it'll be a combination.

I'll tell you why.

You can do it organically, but it's.

You got to invest and Youre not youre not efficient right off the bat.

That if you do it organically because you have to have the critical mass in order to be profitable.

And so if you want to be profitable in <unk> or do you want to be profitable in package and Courier you better have critical mass you can have one shipment in the back of your little delivery then you got to have 50.

That's how you make money in that business.

These guys happen to have we just got a great platform in the Calgary market in the Calgary market is it's not jump change I mean, Calgary markets, one point some million people.

But I can tell you we've got the we got the business model and I can tell you they got to adjust to.

One of the best technology platforms I've seen.

So.

Yes stay tuned on that that's going to be part of our growth.

Package and Courier and.

These guys are competitive there pricing is exponentially below.

The rest of the competitors, which is why they have all the business and they're profitable. That's a tough competitor. So we will continue to look at opportunities to expand that business I think David over the next minute.

That's perfect. That's all I had thanks, a lot Murray thanks, so much.

Our next question comes from Aaron Macneil with TD Securities. Please go ahead.

Hey, good morning, all thanks for taking my questions.

Good morning, Eric and a couple of questions.

But you already had a couple questions on holistic revenue so maybe I'll ask the margin question.

Im just recalling the last conference call you mentioned in general <unk> gross margins are typically around.

10% is sort of downplayed margin expectations for the near term at that time.

Looking at Q3 margins of 9%.

<unk> said that the team exceeded expectations. So I guess I'd, just follow up and ask for a bit more context is this.

Business performing better than you expected out of the gain you.

You mentioned.

Improving performance for acquisitions is that something you still think you can do here or is it running pretty efficiently already.

In your view.

So it's about 10% so nine to 10 is kind of the industry standard. There you just look at the all of the big three PL.

Providers and <unk>.

Got you got two measures one is how much freight did you move thats. The gross revenue and then the net revenue is just the delta that I talk about that spread.

And.

The spread is your net revenue and their margins are very very high on a net margin basis.

And the.

The nine to 10 is probably.

The number that we're after I can tell you they've really outperformed on the revenue side.

And we still have some integration costs that we've got.

When we first get the get the business and.

And some transition costs that are that are embedded in there but.

Overall.

They beat my expectations, particularly on the top line they just.

They continue to amaze me to be honest with you so <unk>.

Maybe that's a good chunk of the market.

And they're taking advantage of that but I also think.

It's also what theyre doing internally and growing the business expanding their network.

<unk> agents so.

Yeah, that's that's the way I look at that.

Okay, maybe one other follow up on direct.

Just a small package and courier business in general.

Is this something that you can leverage your existing warehousing infrastructure to build out or is that something we need to do.

Yes.

Thats a good thats, a good point and Thats part of the synergy part of the opportunity that I see really if you think about what's a warehouse or warehouses just a big it is.

The big spot, where all the delivery guys come into and then you deliver out to the consumer.

<unk>.

That's just called e-commerce, so corier in e-commerce.

Go go fit hand in glove so.

Yes.

Our warehousing business I mean, I'm sitting at my at our warehousing business in Toronto today at Dws, having the meeting with that group here and introduce them to that technology and said look we do the warehousing and they do a fantastic job, but the opportunity is we actually do the delivery to and now we have a technology that would allow.

Them to be very very efficient, which you need then is that is the delivery mechanism.

And network to make sure it's profitable so, yes, I see opportunity with <unk>.

Our housing with the final mile delivery and having that technology platform.

Ill.

That's a good potential.

Opportunity for us to continue to grow and expand our footprint with our customers.

Absolutely.

That's all for me I'll turn it over thanks.

Thank you.

Our next question comes from Kevin Chiang of CIBC. Please go ahead.

Hey, Thanks for the question.

Just got one here one is doing well on the Marlin team.

<unk>.

I guess.

I guess I'm, a little bit surprised by maybe the cautiousness around margin expansion into next year I know, there's a lot of moving parts I get the inflation.

Angle, but I thought when I looked at your.

Let's see same store sales and your logistics and warehousing and <unk> in Q3 kind of about 4% to 5% range and then if I look at U S. Holistic there was.

That's somewhat calculated earlier significantly double digit.

It feels like capacity is constrained on both sides of the border like Youre getting a premium for capacity out. There are you seeing a difference in how customers are pricing or thinking about how they get price for that capacity.

Our U S customers or shippers more.

Open to the pricing that's being pushed through recognizing capacity is scarce and thats just been harder to do in Canada.

If that's the case just wondering why do you think that that is just sort of a tight.

Tight everywhere.

Don't get the same way.

Auction in Canada, as we've seen in the U S.

Well, that's something that I've highlighted over the last bit is the Canadian marketplace is different than the U S. Marketplace. So let me talk about holistic firsthand.

Prices can go up in the marketplace, but.

The cost of contracting goes up to Youre still lumi, managing the spread you're only making 10% off the off the delta right. So the biggest thing that happened in the United States is massive amount growth in logistics and demand and all those kinds of things, but also those that have the asset.

Did exceptionally well so.

They priced accordingly, too so you just manage the spread now Conversely, if it slows down.

They still manage the spread that's why I like that business.

Youre not going to ride. This oh things are great openings are not great in whatever it is quite stable because we just manage the spread there.

So in the U S. Yes prices have gone up but so are the cost of contracting going on.

So.

They've made more money because they get more gross revenue.

And those kind of things so that's the U S market, we have not seen the same pricing leverage in the Canadian market, it's starting Kevin but it is not the same as the as the U S. Where we are at least six months, maybe 12 months behind the U S market.

Told you why it skews everybody got cute so they didn't have to raise prices they were making money because the government gave me money.

Well now youre not getting money you got to make money.

Well costs have gone up so I suspect.

They're going to have to raise and now you've got you've got wage push from drivers.

You hear it nobody can get any drivers.

So the market is in its just a boat.

It is where it is right now I don't think the market's growing a whole bunch right now Kevin I don't I don't know how it can grow I mean, our warehouses are full you can't put more freight through the warehouses full.

Okay.

So.

Now we've been through.

The Canadian marketplace, just hasn't moved on prices as fast as the U S market, but.

I would suspect that 2022 is going to be.

Youre going to be a lot different than what we've seen for a long period of time.

What I articulated is what I think will happen in the fourth quarter.

And then I'll come out with my game plan in December what I think will happen in 2022 suffice to say I've said, we're not going backwards.

That's that's.

That's an absolute that is not negotiable.

Right.

And then it's just a matter of okay. How much are you going to press.

Your customers and those kinds of things I can tell you, though there is a lot of pressure building on pricing right now.

I have not seen pressures like this.

In my career.

Can I add.

Ask.

Okay.

The U S is a bit of a crystal ball.

Canada six to 12 months behind are you seeing your customers maybe proactively come to you.

Secure I looked at looking to secure capacity that you allocate to them in 2022, given given all the supply chain disruptions you're seeing.

In the U S are you seeing any of your customers kind of proactively come to Marlin and say hey.

I want to make sure I get it.

So much trucking capacity somewhat warehousing capacity, because I can see where this is going to go.

Thats up soon enough, yes, yes, so we don't have a lot of that business in the United States.

And when I talk to my peers down there.

There has been some of that but but everybody is cautious right now because nobody wants to get trapped so everybody is kind of playing in the spot market.

It's kind of like.

Ship lines, the marine lines, nobody wants to sign a long term contract because prices have just gone through the friggin roof.

So everybody is a little bit afraid of that and getting trapped.

In Canada, we we've not heard that.

<unk>.

But I'm telling you.

Like.

The balance of power has shifted now where we're seeing the customers.

So it's easier for me to get a customer than it is for me to get.

Employees, so here's my price.

These are these are very awkward discussions.

Because we haven't had these discussions before but the pressures the inflationary pressures in the system everybody gets it there is not one customer that's saying we get it we get it okay and then it's just a matter of okay. How much are we going to get.

Okay.

That's where we're at right now.

No that's that's.

Great call and it sounds like we'll get some more details in the coming weeks here. That's it from me I'm Olympics.

The Marlin team. Thank you very much thanks, Kevin one more comment on pricing and this is a general comment to everybody is it look it.

We have long term customer relations.

We are not going to treat our customers and take advantage of them in the short term at the expense of losing them long term, we sit with the customers. We will get we will make sure our costs are covered and I suspect we might get a little bit more but I am not going to play this game of making.

Trying to catch our customers and trap them and those kinds of things we've been in business too long to know that that will come back and haunt you. So we're not playing that game.

Our final question comes from Elliot for schools of IAA capital markets. Please go ahead.

Hello, Elias how are you Sir.

Fine Thanks, Good morning, Murray and the team.

I know, it's been a long call. So maybe a couple of short questions and.

Maybe the first one and maybe a bit if I can direct towards Richard.

Did you turned down work in Q3 or into Q4 and is it substantial or are you just seeing that as a potential trend.

Turning down work, if you don't get the right price.

Hi, Elias.

Yes, thanks for the question.

We've covered that in Murray has been alluding to what we're doing with.

The.

With the customer and the challenges we're facing here right now as well. It just is simply kind of a supply demand imbalanced customers are looking for things and we're working with each of our customers to provide the right service at the right price. So I don't know if there was a kind of a cataclysmic the issue of saying Hey, there is element, where we're not doing your work, but we're being smart about it.

<unk>.

And we're being and we're being mindful working with each and every of our business units in the segments that we operate in because they're all just because it's a little different in each area. The <unk> people are going into their.

Annual discussions and Murray said with theme with the customers and what we need to be to move forward, but we're but we are working with our customers Murray literally just talk to that point here as well so.

Any color on that.

Elias.

What we are is turning down.

A number of new opportunities that come our way and I suspect that that could be market churning and we're saying we can't take it because you have to have either a facility you have or you have to have access to equipment or people.

So no we're not we can't take a lot of new business because there is no people available.

And not at the expense of existing customers and relationships, we've had with them as well.

So we can work with.

Yes.

I think what that happens when we get a bunch of that is that customers are playing the market to see well I'll go and check I don't know there's nowhere to go.

Everybody's forecast every one of our competitors for every one of our warehouses is full.

Here's the market. This is what we have to pay and we have to make sure that we maintain margin and <unk>.

We do our job properly.

And things work out then our margin should improve but we're an asset light business model now and we use a lot of subcontractors. So.

We.

We don't we don't we're not going to have the same capex requirements that we used to have in the glory days with the oil patch, where we're having $150 million capex spend the year.

We're not going to have that.

We're going to be kind of right in the middle of where we're at now I think last year. We were at 50 and this is this excludes folks at 50 excludes.

Acquisition and excludes.

Real estate.

Those are long term investments, but on the pure capex or replace of the rolling stock.

We might be up a little bit from that next year, we will see the budgets that they all come in but it doesn't matter who can't get it everybody is on allocation will be lucky to be able to meet our threshold for for this year I don't know if we'll get there I don't think it will all be delivered.

Okay.

Appreciate that.

And Murray and thanks, very much for the color Richard Murray you touched upon the next one I wanted to bring about which is your non depreciate non depreciating asset its real estate. So a two part question one for <unk> one for Carson.

You have a lot of real estate, we are in an inflationary environment is this going to give you a competitive advantage going into the future owning at.

The next thing for Carson is we have and by the way I just wanted to thank you for some of the disclosure you put in the results because I was able to get a good handle on incremental margins out of pre may in and drilling related so thanks to that beyond everything else.

But are you going to look at revaluing your real estate at some point to give us an idea of what that might be worth so two questions can.

Can you leverage the fact that you own that non depreciating asset and can you give us an idea of what it's worth at some point in time.

I'll answer the first one for sure.

Yes, we're going to leverage our real estate.

I can tell you owning your own real estate.

<unk> is a competitive advantage and some of the acquisitions I'm looking at.

And we look at the real estate I go.

Real estate has gone through the roof. So in an inflationary environment the more real estate you own probably the better off you are.

Carson I think the real estate value our portfolio is around.

$606 50 of book value.

Yes.

Gary and cost is.

It's about $615 million of the $978 million that we've done on our on our balance sheet. So okay.

Yes, that's what our carrying cost is.

We have not mark to market that I think we did the mark to market of that.

A number of years ago fair market, but the market has gone ballistic since then so.

We haven't.

To answer the second part of your question we haven't.

Thought about that.

Can tell you we look at our real estate as a pure competitive advantage and.

So we will be leveraging that to make sure that.

That embedded cost of the fair market value of that real estate is reflected in the pricing models that our business units are using them telling them.

Real estate prices are up it's not free youre paying your fair rent so charge accordingly.

In terms of re looking at that we may do it.

But.

I don't know, if we will do that or not that I'll have to take that under advisement.

Okay I appreciate the color because I was looking one for pricing.

On that to give you an advantage here to make sure that you're passing through what cost would be in the second really wise from the ability to leverage the real estate from a borrowing indirect borrowing perspective, so that was really the angle I was coming from yes. So look at it.

We allow us if we needed more money, which we don't need more money, but if we needed more money and the only reason we would need money is because we do more acquisitions, we don't need money to run our business in <unk>.

Through all that kind of stuff, we make we make lots of money.

But if we wanted to.

Find it.

Raised capital and leverage our real estate portfolio, yes.

Yes, we could do that we would we would look at it at that time for sure.

Because there is there is embedded value within our real estate portfolio.

You are correct.

Great. Thank you very much for all the color and all the participation and Murray have you set a date for the business plan.

I think we're going to do it about December eight and then we'll we'll submit our will do a press release out on after the board has approved it so.

So great management will prepare it our business units present.

Sent their budgets to us.

Corporate office will review it will package everything together, we will present it to the board the board will debate. It and then we'll put out our plan and our budget for 2022.

Just after December eight.

Great I appreciate that so thanks very much and.

Look forward to the closing comments.

Very much alive.

This concludes the question and answer session I would like to turn the conference back over to Mr. Mullen for any closing remarks.

Thanks, all for joining us folks Carson fantastic job and to our good friends to fan who.

As is in there he will be out shortly and back at it.

But.

That shows you the power of the team we have here.

Stepped in and wonderfully well well done on that and thank you very much folks and we will.

Looking forward to outlining 2022 in early December. Thank you again bye bye.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

[music].